S. 32(1) read with S. 43(6) — WDV of block brought forward from preceeding year to be reduced by WDV of assets discarded.

24 Yamaha Motors India Pvt. Ltd. v. ACIT

ITAT ‘G’ Bench, Delhi

A.Y. : 2000-01. Decided on : 23-5-2008

Counsel for assessee/revenue : Ved Jain/

Surkesh K. Jain

The assessee had capitalised certain assets at Rs.4,71,51,016
on 1-11-1996. WDV of these assets as on 31.3.1999 was Rs.2,32,07,141. These
assets were discarded and written off by the assessee in the books of accounts
during the previous year relevant to A.Y. 2001-02. The discarded assets were not
disposed of or sold during the relevant financial year. The assessee while
computing the WDV of the block of assets qualifying for depreciation did not
reduce the WDV of the block brought forward from immediately preceding previous
year by the WDV of the assets discarded. The AO disallowed a sum of Rs.58,01,785 being depreciation on assets written off in the books of accounts,
on the ground that these assets have not been used for the purpose of the
business of the assessee. The CIT(A) confirmed the action of the AO. The
assessee preferred an appeal to the Tribunal.

The Tribunal noted that the scheme of depreciation effective
from 1-4-1988 has done away with the assetwise depreciation by substituting the
same by the scheme of block of assets by putting all the assets entitled to the
same rate of depreciation in one block of assets. The WDV of the block can now
be adjusted only in the manner provided in Ss.(6) of S. 43 of the Act. The
action of the AO in reducing the WDV of a block of assets by WDV of individual
assets by working out the same on the basis of asset-wise depreciation was held
by the Tribunal to be not in accordance with the provisions of S. 43(6)(c) of
the Act. The Tribunal held that what needs to be reduced from WDV of a block of
assets in the present case is only the scrap value of assets which have been
discarded during the year under consideration.